Current account gap widens further

2012-09-11 10:41

Reuters

Johannesburg - South Africa's current account recorded its
largest shortfall in over three years in the second quarter of 2012 as exports
fell because of subdued external demand, while increased government spending on
wages pushed gross domestic expenditure up.

The Reserve Bank said on Tuesday higher dividend payments to
the rest of the world resulting in a shortfall on the service, income and
current transfer account also added to the current account gap.

"Despite a depreciation in the exchange value of the
rand, export volumes declined notably, influenced by the general moderation in
global demand," the central bank said in its latest quarterly bulletin.

"With South Africa's terms of trade also registering a
modest further deterioration, the deficit on the current account widened to
6.4% of GDP."

The prices of imported goods grew faster than export prices,
with the value of exports contracting.

However, gross spending accelerated in the quarter, led by
government spending on wages after public sector trade unions negotiated a 7%
salary increase in July.

The bank said that even though net dividend payments to
non-residents were expected to remain high, the forecast increases would not be
hugely significant.

South Africa's second quarter growth rebounded to 3.2% due
to a big recovery in the mining sector. However the bank said that growth rate
may not be sustainable.

"The non-primary sector of the economy has slowed down
and the boost we got from mining may come to haunt us in the next
quarter," said Rashad Cassim, head of research the central bank.